"Lord Adair Turner, the former chairman of the UK's financial watchdog, said on Wednesday that "P2P" platforms could be the source of "big losses" over the next five to 10 years that would "make even the worst bankers look like absolute geniuses".

"But his warning was met with criticism from investors and the sector, with some inviting him to visit their credit teams and claiming "we have better people looking at small business lending than banks do".

"They also pointed to his role on the board of OakNorth, a new bank that focuses on lending to entrepreneur-backed start-ups, as representing a conflict of interest.

"P2P platforms are online sites that connect investors directly with borrowers, cutting out the traditional bank as a middleman.

"They tend to charge borrowers - individuals or small businesses - lower interest rates than traditional banks and offer loans more quickly. Investors can gain interest of about 6 per cent a year, which is attractive given the record low Bank of England rate.

"Lord Turner's main concern is the level of credit checks made by these platforms that are quickly handing out loans, and whether people and businesses who borrow can repay ??? especially small start-up companies that are usually deemed very risky.

"P2P emerged in 2005 and now billions of dollars a year are being lent through these platforms worldwide. Even Goldman Sachs and other big investment banks are launching their own versions.

'Lord Turner's comments come two months before P2P investments are made available through tax-free Isas, which is expected to open them up to thousands more consumers."

"Turner makes shallow and disgraceful comments, he is disparaging of a solid UK industry and, indirectly, also of the FCA itself, he should retract his flippant and unresearched comments once he has delved deeper. Ignorance is no excuse for ill-informed comment from a well reported commentator. His confusion over equity capital to start-ups and debt capital to established businesses is also inexcusable and he should have read up on the subject before going public to this extent."

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